ITAT Kolkata Allows LTCG Claim for Lack of Specific Evidence

Raj Kumar Kabra Vs ITO (ITAT Kolkata)

Summery: The ITAT Kolkata allowed Raj Kumar Kabra’s appeal against the CIT(A)’s order, which had upheld the Assessing Officer’s (AO) decision to reject the assessee’s claim of long-term capital gains (LTCG) from the sale of shares of M/s. Unno Industries Ltd. The AO had concluded that the LTCG was bogus based on a general investigation report and common practices observed in similar cases, adding the entire sale proceeds to the assessee’s income and denying the exemption under section 10(38) of the Income Tax Act. The AO dismissed the evidence provided by the assessee to support the genuineness of the share transactions.

The CIT(A) affirmed the AO’s findings, relying on “circumstantial evidence,” “human probabilities,” and “rules of suspicious transactions,” despite the lack of direct evidence contradicting the assessee’s submissions. The ITAT, however, emphasized that decisions should be based on concrete evidence rather than generalizations, suspicion, or conjectures. The Tribunal noted that the revenue authorities’ conclusions stemmed from a general investigation report without specific evidence against the assessee, who was not confronted with any adverse material. Citing several similar cases decided by the Kolkata ITAT and jurisdictional High Courts that had deleted such additions, the Tribunal held itself bound by these precedents. Consequently, the ITAT allowed the assessee’s appeal and directed the deletion of the addition made under section 68 of the Act.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-14, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 25/06/2018, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2014-15.

2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s. Unno Industries Ltd. The AO based on a general report and modus operandi adopted generally in these cases and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of the genuineness of the transaction was rejected.

3. The assessee carried the matter in appeal and the ld. CIT(A), Kolkata, had upheld the addition. The ld. CIT(A) has in his order relied upon “circumstantial evidence” and “human probabilities” to uphold the findings of the He also relied on the so called “rules of suspicious transaction”. No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. In other words, the overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given.

4. Under the circumstances, in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions. Some of the cases were detailed finding have been given on this issue are listed below:-

5. I am bound by the proposition of law laid down in these case law by the Jurisdictional High Court as well as by the ITAT Kolkata. They are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon’ble High Courts and the ITAT.

6. In view of the above discussion the addition made u/s 68 of the Act.

7. In the result, appeal of the assessee is allowed.